Milk Price Tracker

[stablegirl]

So if the euro stays where it is for 2 years, how to they pay the 2ppl from last summer then 1.75 Autumn, 1.5 winter etc. I'd take the 29.5ppl for the next 2 years like everyone else with a calculator.
As a side note I don't think the euro will stay where it is anyway

Cornishfarmer do you understand how the currency smoothing works? Or even want to?

 

[cornishfarmer]

Cornishfarmer do you understand how the currency smoothing works? Or even want to?

I know how it works but I think @Chips is wrong with his interpretation. If the currency stays where it is now for 2 years we will be worse off because we have had 2 years of the currency levelling itself off. So the 29ppl you speak about with today's rate takes 2 years to come through. So he says we will we no better/worse off. I think we will be worse off. I'm not saying the system is wrong I'm saying that you can be worse/better off

 

[stablegirl]

No you cant be worse off thats the whole point every single days exchange rate is factored in and paid out later down the line.

There is no judgement or hocus pocus in it just maths.

The only way you could actually lose is to stop producing or for Arla to scrap the system which right now would do us all over.

 

[Chips]

So if the euro stays where it is for 2 years, how to they pay the 2ppl from last summer then 1.75 Autumn, 1.5 winter etc. I'd take the 29.5ppl for the next 2 years like everyone else with a calculator.
As a side note I don't think the euro will stay where it is anyway

Because if you were paid 29.5p today , i.e no currency smoother you would of also been paid 2-3 p lower in the spring and thus your bank balance would be a good bit lower to start off with , and so if the currency and milk price stay the same for the next two years you will have the exactly the same amount of money in your bank at the end of it , well you will have a bit more on the smoother because you won't have been charged quite as much interest on your overdraft during the depth of the downturn or indeed like many you may have chosen on 16p or less to pack up and thus are no longer in business .
So if your calculator worked properly you would have took the currency smoother as you pay more interest to borrow than to save and have a lower chance of going bankrupt , that is the whole point of the 2 year , 8 quarter rolling currency smoother .
No one makes anything out of it and Arla returns every penny so their is nothing to fear here .
It does seem a lot of people fail to get their head around it though ,so maybe there ought to be the option to take the milk price on a current monthly exchange rate , you would have to buy yourself out of the smoother or get paid out depending on the current position when you opt out . either way I promise you will be no better off at the end of it , calculator or no calculator but you will be far more exposed to volatility.

Edit , you beat me to it StableGirl and managed to say it so much more concisely

 

[Sid]

I thought this was a milk price thread not a currency thread?

If the deals right do it and fix the currency forward. We're suppose to be farmers not bankers or dealers.

 

[stablegirl]

I do agree with Sid on this one, its a whole lot more complicated than producing milk should be.

However, everyone has only got so hung up on it recently when the exchange rate has become so irratic.

 

[cornishfarmer]

I must have it wrong then, but the way I work it is is the pound goes back to were it was we will be the same, if it stays at 15% odd lower we will never see that money in the bank

 

[Sid]

I do agree with Sid on this one, its a whole lot more complicated than producing milk should be.

However, everyone has only got so hung up on it recently when the exchange rate has become so irratic.

And guess what its like the weather we have no control over what it does!
They only thing you can do is what Arla have tried to do which works when its right for you then moan when its not. Cake and eat it sadly.

 

[stablegirl]

I must have it wrong then, but the way I work it is is the pound goes back to were it was we will be the same, if it stays at 15% odd lower we will never see that money in the bank

Yes you are right, you have it wrong.

 

[cornishfarmer]

Yes you are right, you have it wrong.

I dont

 

[bar718]

I dont

Yes I am sorry you do , you are forgetting the quarters that are working there way through the system when the pound was strong and so without a smoothing mechanism the exchange rate would of really hurt us . But as we have already banked that money I agree with you , it's better to forget that bit and complain we are loosing out in the hope we can get the system changed to only kick in when it appears we are loosing out on the exchange rates especially as I like my cake and I certainly like to eat it as well

 

[cornishfarmer]

@bar718 this is what I was responding to

What ever the currency does in the future you will be no worse or better off than if you were paid 29.5p today , that's the point of the smoother , it does not alter how much money you get it just reduces the volatility , which everyone says they want until they are on the wrong side of it

I'm not talking about the past I'm saying this is wrong

 

[cowgirl95]

Surely what matters is what went into your bank account last week for all your hard work in December and over Christmas how much did you get paid last week Arla boys ?

 

[Chips]

@bar718 this is what I was responding to

What ever the currency does in the future you will be no worse or better off than if you were paid 29.5p today , that's the point of the smoother , it does not alter how much money you get it just reduces the volatility , which everyone says they want until they are on the wrong side of it

I'm not talking about the past I'm saying this is wrong

How is it wrong ?
The only way you can lose on the currency smoother is either to cease production at certain points although you could also gain if you ceased production at other points . If like most you intend to stay milking the only way to lose out is if you fluctuate supply and continually increase production when smoother is on one side of the current rate and then decrease production when it's on the other , this situation is unlikely as people tend to either AYR calve or block the same period each year and currency never follows the seasons . However at the moment it paid out in the spring when Arla UK's production is highest and is now not paying out in relation to the current exchange rate when in the Autumn/winter trough and so if anything the UK will have made a small gain overall .

As Bar718 rightly says you cannot have your cake and eat it , if you expect to have the best exchange rate when the currency is in your favour who do you expect to fund you from being protected from the exchange rate when it's not in your favour .
I don't know how better to explain it , but trust us all on here you are no better or worse off for being on the currency smoother what ever the exchange rate has done or will do providing you keep supplying milk but it will save you interest on your overdraft and possibly make the difference between packing up and not if your a tenant like me who might not be able to borrow enough to get through the extra volatility exchange rates bring

 

[Chips]

Surely what matters is what went into your bank account last week for all your hard work in December and over Christmas how much did you get paid last week Arla boys ?

Most of the hard work in December was paid for in December

 

[cowgirl95]

Really do you guys get paid weekly I never realised

 

[Chips]

Really do you guys get paid weekly I never realised

Not weekly, about every two weeks , first 20 days milk paid for less bonuses around about the 27th , the remainder blus bonuses gets paid on about the 12th of following month .
In a rising market it is important to remember the price Arla announce next week will be money paid out in Feb , others will announce around the same time their March price for money paid out in April which is worth remembering when comparing price announcements

 

[More to life]

Currency smoothing down 10% today on 25ppl lose 2.5 p
In two years milk is back at 20ppl but currency is up 10% you gain 2ppl
Have you lost 0.5 pence or not ?

 

[Tonka]

My head hurts..............

 

[Sid]

As Bar718 rightly says you cannot have your cake and eat it

I said it first...now wheres the stamps feet and sulks icon